Fair Value Measurements

6 Months Ended

Jun. 30, 2011

Fair Value Measurements

Fair Value Measurements

NOTE B – Fair Value Measurements

The Company measures financial assets and liabilities at fair value in three levels of input. The three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies, is:

Level 1 — Valuations based on quoted prices for identical assets and liabilities in active markets.

Level 2 — Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

The Company is exposed to foreign currency exchange risk as a result of transactions in currencies other than the functional currency of certain subsidiaries. The Company utilizes foreign currency forward purchase and sale contracts to manage the volatility associated with foreign currency purchases and certain intercompany transactions in the normal course of business. Contracts typically have maturities of less than one year. Principal currencies include the euro, British pound, Japanese yen, and Czech koruna. The Company's foreign currency forward contracts do not qualify as hedges as defined by accounting guidance. Changes in their fair value are recorded in the consolidated statements of operations as foreign currency gains or losses. The changes in fair value generated a net loss of $104 and a net gain of $564 for the three and six months ended June 30, 2011, respectively, and net losses of $666 and $703 for the three and six months ended June 30, 2010, respectively.

At June 30, 2011 and December 31, 2010, the fair value of the Company's derivative liabilities representing foreign currency forward contracts was $239 and $807, respectively. These amounts were recorded on the balance sheet as other current liabilities. As of June 30, 2011, the Company held forward currency contracts to sell (i) 4,700 Czech koruna against the U.S. dollar, (ii) 8,000 euros against the U.S. dollar, (iii) 368,237 Japanese yen against the U.S. dollar, (iv) 600 Australian dollars against the U.S. dollar, (v) 300 British pounds against the euro, (vi) 2,000 Norwegian kroner against the euro, (vii) 850 U.S. dollars against the Czech koruna, and (viii) 1,300 euros against the Czech koruna. As of December 31, 2010, the Company held forward currency contracts to sell (i) 16,900 euros against the Czech koruna, (ii) 386,853 Japanese yen against the U.S. dollar, (iii) 5,000 U.S. dollars against the euro, (iv) 500 Australian dollars against the U.S. dollar, and (v) 75 British pounds against the euro. The Company's foreign currency forward contracts are not exchange traded instruments and, accordingly, are classified as being valued using level 2 inputs which are based on observable inputs such as quoted prices for similar assets and liabilities in active markets.

The Company does not enter into derivative instruments for trading or speculative purposes.

The fair value of the Company's Term Loan is estimated based on the present value of the underlying cash flows discounted at the Company's estimated borrowing rate. Under this method, the fair value of the Company's Term Loan approximated its carrying value at June 30, 2011 and December 31, 2010. The fair value of the Subordinated Notes is estimated based on a third party's bid price. The fair value approximated the carrying value of $163,175 at June 30, 2011 and at December 31, 2010.